Endo notes rise; Rite Aid paper up following downgrades; Party City extends decline

By Cristal Cody

Tupelo, Miss., Nov. 9 – Bankrupt pharmaceutical manufacturer Endo International plc’s notes traded slightly better on Wednesday after the company reported a wide drop in third-quarter revenue and earnings due in part to “higher litigation-related charges” on opioid-related liabilities.

At the start of the month, new opioid-related settlements with drugstore chains CVS Health Corp. and Walgreens Boots Alliance, Inc. were announced.

Fitch Ratings said in a report on Wednesday that it expects continued distress regarding the opioid crisis.

“Several recent bankruptcy filings, including Endo International, Mallinckrodt and Purdue Pharma, were partially related to the opioid crisis,” Fitch said. “Further distress and episodic defaults for companies with a concentration in this market is considered likely.”

Rite Aid Corp.’s 7½% senior secured notes due 2025 (B3/CCC-/CCC) improved 3/8 point over the session following the company’s second downgrade of the week.

Financial markets were under pressure over the session.

The S&P 500 index fell 2.8%.

The iShares iBoxx High Yield Corporate Bond ETF declined 87 cents, or 1.19%, to $71.95.

Volatility slightly increased. The CBOE Volatility index rose 1.8% to $26.

Oil dropped a third consecutive session. The West Texas Intermediate crude oil benchmark futures for December delivery settled down $3.08 to $85.83 a barrel.

Also in the distressed market, Party City Holdings Inc.’s 8¾% senior secured notes due 2026 (Caa1/CCC+) fell another 2¾ points on Wednesday after sliding more than 14 points on Tuesday.

Endo notes up

Endo Luxembourg Finance Co. Sarl’s 6 1/8% senior secured first-lien notes due 2029 (Caa2/CC) rose about ½ point to 76 bid in light trading on Wednesday, a source said.

At the start of the day, Endo reported a third-quarter net loss of $722.17 million, or $3.07 a share, versus a $77.21 million loss, or 33 cents a share, a year ago. Revenue dropped 30%.

The company said losses were “primarily due to higher litigation-related charges in third-quarter 2022 adjusting the company's estimate of opioid-related liabilities” as well as higher asset impairment charges and expenses related to the Chapter 11 reorganization process.

Endo filed for bankruptcy in August after entering into a restructuring support agreement with a majority of holders of its first-lien debt for substantially all of the company's assets on a sale transaction that would reduce outstanding debt and address remaining opioid and other litigation-related claims.

The Dublin-based pharmaceuticals company also reported in a regulatory filing on Wednesday that its stock was delisted from the Nasdaq market in September, and its ordinary shares started trading over-the-counter on Aug. 26.

Rite Aid improves

Rite Aid’s 7½% senior secured notes due 2025 (B3/CC/CCC) rose 3/8 point on Wednesday to 71 bid, a source said.

The issue was up from 70¾ bid on Monday.

The Camp Hill, Pa.-based drug retailer in the prior week announced a cash tender offer for the issue.

Fitch announced it lowered the ratings on Rite Aid and the notes, viewing the tender offer as distressed.

S&P downgraded the issuer and the senior secured paper on Monday.

Party City weaker

Party City’s 8¾% senior secured notes due 2026 (Caa1/CCC+) went out the door on Wednesday 2¾ points lower at 42½ bid following a plunge of 14¼ points the prior day, a market source said.

The bonds sank Tuesday after parent Party City Holdco Inc. reported heavy third-quarter losses.

The Woodcliff, N.J.-based retailer’s secured notes ended October at 64¼ bid.

Distressed index slips

S&P U.S. High Yield Corporate Distressed Bond index one-day returns softened on Tuesday to minus 0.18% from 0.26% on Monday.

Month-to-date total returns for November widened to minus 2.26% from minus 2.09% at the start of the week.

Year-to-date total returns also declined to minus 27.35% on Tuesday versus minus 27.22% on Monday.

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